The anticipated new Pensions Bill was published on 5 December and received its First Reading in the Commons. Explanatory Notes are also now available together with pdf versions.

A Government press release summarised the Bill's proposals:

• Automatic enrolment (employees aged over 22, earning more than £5,000 a year) into a qualifying workplace pension scheme or the new personal accounts scheme from 2012.
• Executive powers for the Personal Accounts Delivery Authority (PADA), allowing the authority to design this scheme at arm's length from Government.
• A role for the Pensions Regulator as the compliance body for these reforms, ensuring employers meet their new obligations.
• Further simplification to the Additional State Pension by consolidating the rights people have built up under Graduated Retirement Benefit, SERPs and State Second Pensions into a single cash sum.
• Measures to ease the burden of regulation on employers, including a reduction in the cap on revaluation of deferred pensions from 5 per cent to 2.5 per cent - for future accruals only.

The Bill has five Parts:

• Part 1 (Clauses 1 - 77 plus Schedule 1) sets out the new duties on employers to automatically enrol eligible jobholders into automatic enrolment schemes and to contribute to those arrangements. It defines jobholders, qualifying earnings (band £5,035-£33,540, on which a forthcoming Order will specify 4% employee and 3% employer contributions, earnings-indexed) and qualifying schemes (occupational or personal pension schemes* which meet a quality requirement).
  * including Group Personal Pensions (GPPs). The Government seems determined to ignore the fact that the EU Distance Marketing Directive 2002/65/EC (which it claims to support) prohibits auto-enrolment into contract-based schemes, such as GPPs, in the hope that those responsible for monitoring implementation of the Directive won't notice.
• Part 1 also makes provision for a regime to ensure compliance with these duties, and for the protection of employment rights. It covers the establishment of a trust-based occupational pension scheme and enables PADA to implement it. It also provides for a trustee corporation (whose consent is to be required for any orders or rules).
• Part 2 (Clauses 78 - 81 plus Schedules 2 and 3) contains measures to simplify and amend existing private and state pensions legislation, including the abolition of safeguarded rights (by simply providing that Part 3A of the Pension Schemes Act 1993 shall cease to have effect) and new rules for the revaluation of accrued rights, previously announced in the official response to the Deregulatory Review (see below). Part 2 also sets out a new method of assessing certain components of state pensions, to provide a single consolidated additional pension.
• Part 3 (Clauses 82 - 96 plus Schedules 4, 5 and 6) establishes arrangements for compensation paid by the Pension Protection Fund to be shared on divorce or dissolution of a marriage or civil partnership. It also makes changes to the compensation provisions to improve the PPF’s operation.
• Part 4 (Clauses 97 - 103 plus Schedule 7) contains a variety of measures to adjust existing pensions legislation. This includes changes to the treatment of pension sharing orders in the Court of Session in Scotland.
• Part 5 (Clauses 104 - 111) contains technical provisions.

By making employers contribute to employees' pensions for the first time, the Government is Bill is finally recognising the achilles heel of stakeholder pensions. It replaces the requirement for employers to designate a stakeholder pension scheme, which was never enforced, by the requirement to auto-enrol employees into personal accounts or a qualifying pension scheme. Enforcement will still be problematic, although the Pensions Regulator (TPR) is given stronger powers than Opra had. TPR will be able to fine employers who fail to comply up to £50,000 initially, increasing by up to £10,000 a day.

At the same time as the Bill appeared, the Government responded to the autumn consultation on its proposals (see previous article) for easing the burden of regulation.

The main outcome of this deregulatory review (ironically contrary to the recommendation of the reviewers themselves) is the controversial option for defined benefit schemes to limit revaluation of deferred pensions to 2.5% (instead of 5%) for rights accrued after the date the Bill's provisions are commenced. The Government says this will save employers around £250m a year on average in the longer term, but how many schemes will decide the additional administrative burden of revaluing in two tranches is worthwhile remains to be seen.

Other decisions the Government has made include

• As with the change to the revaluation cap, statutory overrides to enable scheme rules to be amended to reflect the 2004 change to the indexation cap for future service should only be exercisable with the proper agreement of both trustees and employers.
• No change to statutory LPI requirements.
• On refunds of surplus, not to remove the requirement in the Pensions Act 1995 for trustees to be satisfied that a payment of surplus to the employer must be in the scheme members' interests.
• On pension sharing, safeguarded rights will be abolished (see above) and DWP legislate to align the payment of pension credit benefit with the rules that apply to private and occupational pensions.
• On trivial commutation, consultation responses have been shared with HMRC, who will consider them as part of their ongoing discussions on the issue.
• To continue discussions with the industry on the difficulties created by the current debt on employer regs, beyond the changes already outlined in draft amending regulations.
• On moving to principles based legislation, using OPS Disclosure Regulations as a test bed, a Working Group comprising key stakeholders has been set up. Perhaps this Group might recommend a single set of regs to cover all registered pension schemes, including personal pensions.